Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.
It is no secret that FedEx Corp. and UPS Inc. have long enjoyed a near duopoly on U.S. business-to-business ground parcel traffic, and that they have used their market power to move in virtual lockstep when setting published rates for those services.
However, data compiled by consultancy Supply Chain Optimizers and obtained by DC Velocity puts that anecdote in stunning statistical perspective: Over the past 10 years, the average cumulative list rate increases on the two companies' ground delivery services have been identical across the board.
According to the data, FedEx and UPS each increased their list rates by a total of 91.5 percent on shipments weighing between one and 10 pounds; parcels weighing within that range account for a large share of the companies' ground traffic. For parcels weighing between one and 25 pounds, the increases were an identical 81.5 percent, the data show. For all ground parcel shipments, the increases were lower at 38.5 percent, but still identical, according to the data.
Domestic ground parcel deliveries represent a huge component of the two firms' combined traffic. In the fourth quarter of 2015, a period skewed by the peak holiday shipping season, UPS moved slightly less than 13 million U.S. ground parcels per day. In its 2016 fiscal year, which ended May 31, FedEx's ground-parcel unit moved an average of 7.5 million parcels a day.
Jack T. Ampuja, Supply Chain Optimizers' president, said he was surprised that the two firms moved almost as one in setting list prices for ground parcel deliveries. UPS and FedEx kept their rates the same for what Ampuja called "competitive positioning." He added that shippers who bother to compare rates between the two will "focus on ground only, giving the carriers more pricing flexibility in other services."
Indeed, the companies' list pricing for nonground services has not moved in unison over the past 10 years, according to the Supply Chain Optimizers' data. For example, FedEx's largest cumulative increase since 2006 was a 92.3-percent hike on second-day air deliveries. By contrast, UPS has raised list prices by more than 100 percent on six products in its air and ground delivery portfolio, the data show. The largest, a 105.6-percent hike, has been imposed on the company's "Next Day Air Saver" product, which guarantees deliveries by the end of the next business day.
Divergences aside, the healthy pace of price increases reflects the tremendous leverage the two firms have enjoyed through the years over business-to-business parcel traffic, according to Ampuja. FedEx and UPS do not have nearly the dominance over business-to-consumer traffic, where they compete most prominently with the U.S. Postal Service and, increasingly, with Seattle-based e-commerce behemoth Amazon.com Inc.
In an e-mailed statement, Perry Colosimo, a FedEx spokesman, said the unit's pricing strategy is "based on economic conditions and the value of the services we provide." In a separate e-mail, Steve Gaut, a UPS spokesman, said the rate increases reflect the "capital intensive" nature of UPS' services and the need to recoup its costs. Gaut questioned whether the analysis incorporated the different rate classes that comprise UPS' list pricing.
For his part, Ampuja said the conclusions were based on a colleague's analysis of years of rate tables published by the two carriers. "We believe his conclusions are rock-solid," he said.
The ground-delivery price increases do not affect the many FedEx and UPS shippers who tender parcels under contracts with their providers. Rather, the increases, combined with recent moves by both companies to base all ground parcel pricing on a shipment's dimensions rather than its weight, tend to "punish small shippers who aren't covered by contracts, and have applied no science to their packaging," Ampuja said.
In late 2015 and early 2016, FedEx and UPS shifted to dimensional pricing on parcels measuring less than three cubic feet, which represent the lion's share of e-commerce traffic. The change was expected to lead to hefty rate increases for shippers of lightweight and bulky items unless they streamlined their packaging to eliminate excess cube, or added density to their consignments.
The carriers said the change in their pricing formulas was justified to compensate them for the disproportionate amount of space those items occupy aboard a delivery van.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.
Serious inland flooding and widespread power outages are likely to sweep across Florida and other Southeast states in coming days with the arrival of Hurricane Helene, which is now predicted to make landfall Thursday evening along Florida’s northwest coast as a major hurricane, according to the National Oceanic and Atmospheric Administration (NOAA).
While the most catastrophic landfall impact is expected in the sparsely-population Big Bend area of Florida, it’s not only sea-front cities that are at risk. Since Helene is an “unusually large storm,” its flooding, rainfall, and high winds won’t be limited only to the Gulf Coast, but are expected to travel hundreds of miles inland, the weather service said. Heavy rainfall is expected to begin in the region even before the storm comes ashore, and the wet conditions will continue to move northward into the southern Appalachians region through Friday, dumping storm total rainfall amounts of up to 18 inches. Specifically, the major flood risk includes the urban areas around Tallahassee, metro Atlanta, and western North Carolina.
In addition to its human toll, the storm could exert serious business impacts, according to the supply chain mapping and monitoring firm Resilinc. Those will be largely triggered by significant flooding, which could halt oil operations, force mandatory evacuations, restrict ports, and disrupt air traffic.
While the storm’s track is currently forecast to miss the critical ports of Miami and New Orleans, it could still hurt operations throughout the Southeast agricultural belt, which produces products like soybeans, cotton, peanuts, corn, and tobacco, according to Everstream Analytics.
That widespread footprint could also hinder supply chain and logistics flows along stretches of interstate highways I-10 and I-75 and on regional rail lines operated by Norfolk Southern and CSX. And Hurricane Helene could also likely impact business operations by unleashing power outages, deep flooding, and wind damage in northern Florida portions of Georgia, Everstream Analytics said.
Before the storm had even touched Florida soil, recovery efforts were already being launched by humanitarian aid group the American Logistics Aid Network (ALAN). In a statement on Wednesday, the group said it is urging residents in the storm's path across the Southeast to heed evacuation notices and safety advisories, and reminding members of the logistics community that their post-storm help could be needed soon. The group will continue to update its Disaster Micro-Site with Hurricane Helene resources and with requests for donated logistics assistance, most of which will start arriving within 24 to 72 hours after the storm’s initial landfall, ALAN said.